Pwn5 is the ultimate way to say "pwns", much in the same way "1337" is the ultimate way to say "l33t". Essentially it means "is much better than" or "humiliates", and is most commonly used as a verb.

The "5" represents the "s". It is also mid-way between 0 and 10, so is considered a direct hit between the eyes i.e. perfect. This stems from the origins of the word in online multiplayer gaming, where a perfect shot is respected.